# 56.4 PARBHAT GENERAL AGENCIES ETC v. UNION OF INDIA & ANR. ETC

- **Citation:** [1971] 2 S.C.R. 564
- **Court:** Supreme Court of India
- **Decided:** 1970-10-12
- **Case number:** Civil Appeals Nos. 1961 to 1963 of 1966
- **Bench:** J. C. Shah, S. He7De, A. N. URolER
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/56-4-parbhat-general-agencies-etc-v-union-of-india-anr-etc-5183
- **Pages:** 9

## Headnote

Arbitration Act, 1940, s. 8(1) (b)-Scope of-Circum<tances in which
an arbitrator in place of named or designated arbitrator can be appointed.
The appellants entered into agreements
with
the Union
of India
under which they were allotted
certain
areas in a 1forest to tap ~esin
Blazes. The agreement included an arbitration clause which provided
that any questions, differences, or disputes between the parties would be
referred for
arbil~ation to the Judicial Commissioner, Himachal Pradesh.
After certain disputes had arisen, the appel'.ants ·requested
the
respondents to refer the disputes to the arbitration of the Judicial Commissione.r but the respondents declined
to agree.
The appellants
then
filed an application under
s. 20 of the Arbitration Act, 1940, for an
order on the respondents ,o file the agreements _in the court and for reference of the disputes to the Judicial Commissioner for arbitration. The
Trial Court accepted the applications and referred the disputes.
However the Judicial
Commissioner
declined to act as an arbitrator. An
application made to the Court for the appointment of some other arbitrator was opposed by th.e respondents on the ground that the arbitration clause did not provide for such an appointment and. this application was rejected by the court.
The Judicial Commissioner dismissed
the revision petitions filed by the appellants following an earlier decision
of that court and holding that under the agreements; no reference for
arbitration could be made to anyone other than the named authority.
On appeal to this Court,
HELD : The appeal must be allowed and the orders passed by the
trial court as well as the Judicial Commissioner set aside.
The cases
must be remitted 10 the Trial Court for appointing a new :rrbitrator in
place of the Judicial Commissioner.
The substantive rights of the parries are found in s. 8(1)(b). Before
s. 8(l)(b) can come into operation, it must .be shown that (1) there is
an agreement between the parties 10 refer the dispute to-arbitration; (2)
that they must have appointed an arbitrator. or arbitrators or umpire to
resolve their dispute; (3) any one or more of.those arbitrators. or umpire
must have neglected or refused to act or is incapable of acting or has
died· ( 4) the arbitration agreement must not show that ·it was intended
that' the vacancy should not be filed; and (5) the parties or the arbitrators as the case may be had not supplied the vacancy. [568 El
In the present case ·all the other Tequirements were satisfied and_ the
Qnly question v.:as \\-'hether the agreement read as a whole shows either
explicitly or implicity that the partie_s intended that the vacancy sho~ld
not be supplied. It may be noted that the Jangu~ge of th~ prov151~m
is not 'that the parties intended to supply the vacancy but that the parties
did not intend .to supply the vacancy'.
In other words if the agreement
is silent as ·regards supplying the vacancy, the law presumes that the
parties intended to supply the vacancy. To take t~e case out of s. 8(1)(b)
what is required is not the intention of the parties to supply the vacancy
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PARBHAT AGENCIES v. UNION (Hegde. J.)
565
but their intention not to supply the vacancy. [568 Gl
The Judicial Contn1issioner as well as the trial court erred in thinking
that merely because the arbitrator was designated with reference to the
office held hy him. it should be inferred that the parties inteaded not to
supply the 'acancy.
The appointment of the Judicial Commissioner as
arbitrator hy itself do~ not afford any indication that the p;1rties to the
agreement intended not to supply the vacancy i"f the Judicial Commissioner
refused to act or was incapable of acting.
What the Judicial Commissioner could have competently done if he had acted as an arbitrator could
certuinly he done by an independent
and impartial
person
possessing
adequate knowledge of law.
The language of s. 8(1)tb) is plain and
unamhiguous and the tern1-; of the agreement in the

## Text

56.4
PARBHAT GENERAL AGENCIES ETC.
v.
UNION OF INDIA & ANR. ETC.
October 12, 1970
[J. C. SHAH, K, S. HE7DE AND A. N. URolER, JJ.]
Arbitration Act, 1940, s. 8(1) (b)-Scope of-Circum<tances in which
an arbitrator in place of named or designated arbitrator can be appointed.
The appellants entered into agreements
with
the Union
of India
under which they were allotted
certain
areas in a 1forest to tap ~esin
Blazes. The agreement included an arbitration clause which provided
that any questions, differences, or disputes between the parties would be
referred for
arbil~ation to the Judicial Commissioner, Himachal Pradesh.
After certain disputes had arisen, the appel'.ants ·requested
the
respondents to refer the disputes to the arbitration of the Judicial Commissione.r but the respondents declined
to agree.
The appellants
then
filed an application under
s. 20 of the Arbitration Act, 1940, for an
order on the respondents ,o file the agreements _in the court and for reference of the disputes to the Judicial Commissioner for arbitration. The
Trial Court accepted the applications and referred the disputes.
However the Judicial
Commissioner
declined to act as an arbitrator. An
application made to the Court for the appointment of some other arbitrator was opposed by th.e respondents on the ground that the arbitration clause did not provide for such an appointment and. this application was rejected by the court.
The Judicial Commissioner dismissed
the revision petitions filed by the appellants following an earlier decision
of that court and holding that under the agreements; no reference for
arbitration could be made to anyone other than the named authority.
On appeal to this Court,
HELD : The appeal must be allowed and the orders passed by the
trial court as well as the Judicial Commissioner set aside.
The cases
must be remitted 10 the Trial Court for appointing a new :rrbitrator in
place of the Judicial Commissioner.
The substantive rights of the parries are found in s. 8(1)(b). Before
s. 8(l)(b) can come into operation, it must .be shown that (1) there is
an agreement between the parties 10 refer the dispute to-arbitration; (2)
that they must have appointed an arbitrator. or arbitrators or umpire to
resolve their dispute; (3) any one or more of.those arbitrators. or umpire
must have neglected or refused to act or is incapable of acting or has
died· ( 4) the arbitration agreement must not show that ·it was intended
that' the vacancy should not be filed; and (5) the parties or the arbitrators as the case may be had not supplied the vacancy. [568 El
In the present case ·all the other Tequirements were satisfied and_ the
Qnly question v.:as \\-'hether the agreement read as a whole shows either
explicitly or implicity that the partie_s intended that the vacancy sho~ld
not be supplied. It may be noted that the Jangu~ge of th~ prov151~m
is not 'that the parties intended to supply the vacancy but that the parties
did not intend .to supply the vacancy'.
In other words if the agreement
is silent as ·regards supplying the vacancy, the law presumes that the
parties intended to supply the vacancy. To take t~e case out of s. 8(1)(b)
what is required is not the intention of the parties to supply the vacancy
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PARBHAT AGENCIES v. UNION (Hegde. J.)
565
but their intention not to supply the vacancy. [568 Gl
The Judicial Contn1issioner as well as the trial court erred in thinking
that merely because the arbitrator was designated with reference to the
office held hy him. it should be inferred that the parties inteaded not to
supply the 'acancy.
The appointment of the Judicial Commissioner as
arbitrator hy itself do~ not afford any indication that the p;1rties to the
agreement intended not to supply the vacancy i"f the Judicial Commissioner
refused to act or was incapable of acting.
What the Judicial Commissioner could have competently done if he had acted as an arbitrator could
certuinly he done by an independent
and impartial
person
possessing
adequate knowledge of law.
The language of s. 8(1)tb) is plain and
unamhiguous and the tern1-; of the agreement in the pre"ent case did not
in the
lea~t sho,,· that th~ parties intcn<lc<l nol to -.upply hi..' vacancy.
1569 D1
Goveniur General in Cuuncil v. Associated Li1·£' Srock Fan11 (India)
f.td .. I.I .R. 1948 \'ol. I Cal. !hi: Union of India v. Raj Narain Misra,
(1952)
r, Cal. 34:!
anJ Fertilizer
Corporatio11 of India Ltd. v. M/s.
Do111c.\·tic Engg. /11stallatio11. A. I. R. 1970 All. 31 ; r~f~rrcd tl'.
(.'hie/ .Engineer, B11ildinf(s and
Roads,
Jaipur
and a111-. \'. Harban.'i
Sin!-!'1 A.l.R. 1955 Raj, 30 und 1W/.\·. Jsh<•rc/a,\·s Sahni and Bro.\. v. Union
of India 1111d orsr 68, P.L.R. p. 325; distinguished.
Di>tricr Co-overative Federation Ltd. v. Klwh Chand. A.1.R. 1961
H.P. 35 anJ Bharat Construction Co. Ltd. v. Union of India, A.1.R. 195·i
Cal. 606; disapproved.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1961
to 1963 of 1966 .
Appeals by special leave from the order dated October 27,
1965 of the Judicial Commissioner's Court, Himachal Pradesh at
Simla in Civil Revision Nos. 16 to 18 of 1965.
Bishan Narain, B. Datta, for the appellant (in C.A. No. 1961
Of 1966).
B. Datta, for the appellants (in C.As. Nos. 1962 and 1963 of
1966).
V. C. Mahajan, for th!! respondents (i•n all the appeals).
The Judgment of the Court was delivered by
~egde,_ J.
These appeals by special leave raise a common
questJon of law. Therefore they can be dealt with together. The
appellants )lerein entered into agreements with the Union of India
under which they were allotted certain areas in a forest to tap
~esin Blaz.es and supply the same to the Turpentine Factory at
S1rmur.
The agreements entered into included an arbitration
clause. That clause i~ common in all the three agreements. That
clause reads thus :
"If any question, difference or objection whatsoever
shall arise in any way connected with or arising out of
9-L436Sup.CJ/71
566
SUPREME COURT REPORTS
[1971] 2 S.C.R.
this or the meaning or operation of any part thereof or
the rights dues or liabilities of either party, then save in
so far as the decision of any such matter is hereinbefore
provided for and has been so decided, every such matter
including whether its decision has been otherwise provided for and whether it has been fi11ally decided accordingly or whether the contract should be terminated or has
been ·rightly terminated and as regards the rights and
obligations of the parties as the result of such termination
be referred for arbitration to t)Je Judicial Commissioner,
Himachal Pradesh, and his decision shall be final and
binding and where the matter involves a claim for or the
payment or recovery or deduction of money, only the
amount, if any awarded in such arbitration shall be recoverable in respect of the matter so referred."
The parties are agreed that no other clause in the agreements
is relevant for our present purpose.
Disputes arose between the
appellants and the respondents in respect of some claims arising
from the said contracts. The appellants requested the respondents
to refer the disputes to the arbitration of the Judicial Commissioner, Himachal Pradesh. The iespondents declined to agree to make
the reference in question.
Thereafter the appellants moved the
Senior Sub Judge, District Sirmur Nihan under s. 20 of the Indian
Arbitration Act, 1940 (to be hereinafter referred to as the Act) for
ordering-the respondents to file the agreements in question in his
court and for referring the disputes to the Judicial Commissioner,
Himachal Pradesh for arbitration. The learned Sub-Judge accepted these applications and directed the respondents to file the agreements in question into his court.
Thereafter he referred the disputes to the arbitration of the Judicial Commissioner, Himachal
Pradesh.
The Judicial Commissioner, in our opinion rightly declined to act as an arbitrator. Thereafter the learned subordinate
judge was moved to appoint some other arbitrator in place of the
Judicial Commissioner.
The respondents opposed that prayer on
the ground that arbitration clause did not privide for such an
appointment.
The learned subordinate judge accepted that contention and dismissed the applications.
As against that decision
the appellants went up in revisions to the Judicial Commissioner,
Himachal Pradesh. · The Judicial Commissioner following an earlier decision
of that court in - District Co-operative
Federation
Ltd. v. Khub Chand(!) dismissed the revision petitions holding that
under the agreements no reference for arbitration can be made to
anyone other than the named authority. The question for decision
is whether the interpretation placed by the courts below on the re·
Jevant provision in the arbitration agreements is correct.
(1) A.!.R. 1961 H.P. 35.
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PARBHAT AGENCIES v. UNION (Hegde, !.)
567
It may be noted that the agreements in these appeals relate to
the exploitation of certain forest produce. The disputes that have
arisen between the parties are not of technical nature requiring atty
specialised knowledge on the part of the arbitrator. It is clear
from the terms of the agreements that the Judicial Commissioner
was not appointed as an arbitrator because of any special or
technical knowledge possessed by him relating to the subject matter
of the dispute
Evidently he was appointed, though in our opinion
quite improperly, arbitrator because he was a high judicial officer.
The relevant provisions of the Act which bear on the point under
consideration are ss. 8( 1) and 20( 4) -of the Act. Section 8( 1) reads :
"Power of Court to appoint arbitrator or umpire.
"In any of the following cases-
(a) where an arbitration agreement provides that the
reference shall be two or more arbitrators to be
appointed by consent of the parties, and all the
parti~s do not after differences have arisen, concur in the appointment or appointments; or
(b) if any appointed arbitrator or umpire neglects or
refuses to act, or is incapable of acting, or dies,
and the arbitration agreement d0es · not show
that it was intended that the vacancy should not
be filled and the parties or the arbitrators, as the
case may be, do noi supply the vacancy.
(c) where the .parties or the arbitrators are required
to appoint an umpire and do not appoint him;
any party may serve the other parties or the
arbitrators, as the case may be, with a written
notice to concur in the appointment or appointments or in supplying the vacancy."
Section 20 reads thus :
"(I) Where any persons have entered into a arbitration agreement before the institution of any suit
with respect to the subject-matter of the agreement or any part of it, and where a difference has
arisen to which the agreement applies, they or
any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction
in the matter to which the agreement relates, that
the agreement be filed in Court.
(2) The application shall be in writing and shall be
numbered and registered as a suit between one or
more of the parties interested or claiming .to be
568
SUPREME COURT REPORTS
[1971 J 2 S.C.R:.
interested a~ plaintiff1 or plaintiffs and the remainder as defendant or defendants, if the application has been presented )ly all the parties, or,
if otherwise, between the applicant as plaintiff
and tlte other parties as defendants.
(3) On such application being made, the Court shall
direct notics: thereof to be given to all the parties
to the agreement other than the applicants, requiring them to show cause within the time
specified in the notice why the agreement should
not be filed;
(4) Where no sufficient cause is shown, the Court
shall order the agreement to be filed, and shall
make an order of reference to the arbitrator
appointed by the parties, whether in the agree·
ment or otherwise, or, where the parties_ cannot
agree upon an arbitration, to an arbitrator appointed by the Court.
(5) Thereafter the arbitration shall proceed in
accordance with, and shall be governed by, the
other provisions of this Act so far as they can
be made applicable."
Section 20 is merely a machinery provision. The substantive
rights of the parties are found in s. 8(1)(b}. Before s. 8(l)(b) can
come into operation it must be shown that (1) there is an agreement betwe~n the parties to refer the dispute to arbitration; (2) that
they must have appointed an arbitrator or arbitrators or umpire to
resolve their dispEte; (3) anyone or more of those arbitrators or
umpire must have neglected or refused to act or is incapable of
acting or has died; (4) the arbitration agreement must not show that
it was intended that the vacancy _should not be filled and (5) the
parties or the arbitrators as the case may be had not supplied the
vacancy.
In the cases before us it is admitted that there is an agreement
H. refer the dispute to arbitration. It is also admitted that the parties had designated the Judicial Commissioner of Himachal Prade~
as the arbitrator for resolving any dispute that may arise between
them in respect of the agreement. The Judicial Commissioner had
refused to act as the arbitrator. The parties have not supplied that
vacancy.
Therefore the only question is whether .the agreement
read as a whole shows either explicitly or implicitly that the parties
intended that the vacancy should not be supplied. It may be noted
that the language of the provision is not 'that the parties intended
to supply the vacancy' b_ut on the qther hand it is that 'the parties
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PARBHAT AGENCIES v. UNION (Hegde, J.)
569
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did not intend to supply the vacancy'. In other words if the agree·
ment is silent as regards supplying the vacanc;y, the law presumes
that the parties intended to supply the vacancy. To take the case
out of s. 8(l)(b) what is require<! is not the intention of the parties
to supply the vacancy but their' intention not to supply the vacancy.
We have now to see whether the agreements before us indicate such
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an intention .
. As mentioned earlier the only relevant provision m the agreements before us is the provision relat\ng to arbitration. The ·other
provisions in the agreements do not throw any light as regards the
intention of the parties. We have earlier mentioned that the Judie
cial Commissioner, Himachal Pradesh could not have been
appointed as the arbitrator for any specialised knowledge possessed by him relating to any dispute that may arise under the agreement.
What the Judicial Commissioner could have competently
done if he had acted as an arbitrator could certainly be done by an
independent and impartial person possessing adequate knowledge
of Jaw. Ill our opinion the Jangu1;1ge of s. 8(1)(b) is plain and unD · ambiguous and the terms of the agreement before us do· not in the
least show that the parties intended not to supply the vapancy. The
Judicial Commissioner as well as the learned subordinate judge
erred in thinking that merely because the arbitrator was designated
with reference to the office held by him, it should be inferred that
the parties intended not to supply the vaci.ncy. Evidently the parB
ties did not mention the name of any particular Judicial Commissioner as arbitrator becausi: there may be a change in the personnel.
The appointment of Judicial Commissioner as arbitrator by itself
does not afford any indication that the partie-B to be agreement
fotended not to supply the vacancy if the Judicial Commissioner
refused to act or is incapable of acting .
. f.
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In Governor General in Council v.
Associated Live Stock
Farm ·(lndia)Ltd.(~), the arbitration clause that came to be oonsidered by the Conrt read as follows :
•
"Any dispute or difference arising out of the contract, settlement of which is not hereinbefore provided
for, shall be referred to the arbitration of the officer sanctioning the contract whose decision shall be final and
binding."
Interpreting that clause read alongwith other clauses in the
arbitration agreement Das J. (as he then was) observed :
H
"I do not find anything in the arbitration clause
suggesting that the parties agreed that any vacancy in the
{I) I. L. R. 1948 Vol. I Cal. 161.
570
SUPREME COURT REPORTS
[1971] 2 S.C.R.
office of arbitrator ,hould not be filled up. In the absence of any such agreement the vacancy can be easily
supplied and there is no reason to think that the arbitration will be infructuous at all. If the-particular officer
sanctioning the coniracts refuses rO"~ct or is incapable of
doing so by reason of his absence or otherwise there are
provisions in the Arbitration Act for the appointment of
another arbitrator in his place and the arbitrator so
appointed will be quite competent to proceed with the
arbitration."
In Union of India v. Raj Narain Misra(') S. R. Das Gupta J,
-(as he then was) held that in the absence oJ an indication in the
agreement against supplying any vaca1ncy in the office of the arbi~
trator .and in view of the provision in s. 8 of the Arbitration Act,
1940, for supplying a vacancy, the agreement forarbitration cannot
become infructuous due to a vacancy.
In Fertilizer Corporation of India Ltd. v. M/s. Domestic Engg.
Installation('), a division bench of the Allahabad High Court laid
down that a perusal oi cL ( 4) of s. 20 of the Act indicates that
there are three courses open to the. court under that provision of
law.
After the arbitration agreement has been ordered to be filed
the court shall proceed to make a reference firstly to the arbitrator
appointed by the parties in the agreement; secondly to the arbitrator not named in the agreement, but with regard to whom the
parties agree otherwise; and thirdly when the parties cannot agree
upon an arbitrator; to an arbitrator appoinred by itself.
The respondents, in support of their case that the vacancy could
not be filled up relied on the decision of the Rajasthan High Court
in Chief Engineer,. Buildings and Roads, Jaipur and anr. v.
Harbans Singh('). Therein Wanchoo C.J. (as he then was) after
referring to the various clauses in the agreement and particularly to
the clause which said "that the Chief Engineer shall be the sole
arbitrator and judge in case of dispute .... " came to the conclusion that the parties to the agrf!f!ment intended that the vacancy
should not be filled up if the Chief Engineer refused or failed to
act. The said decision turned on the facts of that case. The
learned judges who decided that case came to the conclusion by
reference to the various clauses in the agreement that the parties
to the agreement intended not to supply the vacancy. Hence this
decision is clearly distinguishable.
Reliance was next placed by the respondents o.n the decision of
the division bench of the Calcutta High Court in Bharat Construction Co. Ltd. v.
Union of India('); Therein Chakravarti C.J.
(I) (1952) I, Cal.
342.
(3) A.LR. 1955 R1j. 30.
(2) A.LR. 1970 All. 31.
(4) A.J.R. 1954 Cal. 606.
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PARBHAT AGENCIES v. UNION (Hegde, J.)
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speaking for the court opined that it is doubtful whether cl. ( b) of
s. 8(1) of the Arbitration Act at all applies to a case where a named
arbitrator, abviously chosen for the possession of qualifications
special to him, has become unavailabJe or re{used to act; but any
way the applicability of that clause in a par.ticular case, must be
dcternuned by the test laid down in 'the section itself; the test is
that the arbitration agreement must not show that it was·intended
that th~ vacancy should not be supplied; in other words however
individual, the original choice may appellr to be, if the ·agreement
itself contains sufficient indication that the parties nevertheless in·
tended that, in default of their original JlOmine~. they would be
prepared to fill up the vacancy by choosing another arbitrator, the
section will apply and a new appointment may be made either by
the parties or by the Court, as the case may be.
In our opinion the learned judge while approaching the question from a correct angle fell into the error of thinking that the
agreement must indic11te that the parties intended to fill up the
vacancy. That is not whats. 8(l)(b) says. What that section says
is that "the arbitration agreement does not show that it was intended that the vacancy shot1ld not be supp!led.".
Reference was next made to the decision of the Judicial Commissioner, Himachal Pradesh in Distt. Co-operative Federation,
Ltd.'s case('). Therein the learned judge purporting to follow the
decision in Harbans Singh's case(') held that it may reasonably be
assumed that the way arbitrator is appointed by the parties with
reference to the office 'the intention is that the arbitration should be
conducted by the holder of that office and by none else; and on
refusal of such an arbitrator to act, the court has no power to
appoi~t another in his place. The learned judge, in our opinion;
has misunderstood the decision of the Rajasthan High Court and
the principles of law enunciated by him are not borne out by
the provisions of s. 8(l)(b).
Lastly reference was made on behalf of the respondents to the
decision of the Punjab High Court in Mis. lsherdass Sahni and
Bros. v. Union of India and ors. (8 ) wherein one of us (Grover J.)
after referring to the various decisions rendered under s. 8(1 )(b)
an~ .s. 20(~) of the Act ~i;d !JOti7i~g the conflict of the judicial
op1mon reiected the rev.1s10n ·petJl!on solely on the ground that he
would not be justified in. the exercise of his revisional powers in
setting !!side the view taken by the lower court. In fact in the
course of his judgment he observed :
. "If the matter were res integra I might have agreed
with one view or the other but in my opinion the court
below has on a consideration of the material facts and
---
(l) A. I. R. 1961 H.P. 35.
(2) A. I. R, 1955 Raj. 30.
(3) 68. P. L. R. p. 325.
572
SUPREME COURT REPORTS
[l 971] 2 S.C.R.
relevant law came to the conclusion that the arbitration
agreement in queitiPn showed that there was no intention to fill up J,he vacancy. I would not be justified in
Revision· in setting aside that finding even if I was disposed not to concur wjth the decision of the trial court 011
this poin\.''
For the reasons mentioned above we. allow these appeals, set
aside the orders passed by the subordinate judge as well as by the
Judicial Commissioner and remit the cases to the trial court for
appointing a new.arbitrator in place of the Judicial Commissioner,
Himachal Pradesh.
The respondents shall pay the costs of the
appellants both in this Court as well as in the courts below.
R.K.P.S.
Appeals !II/owed.
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